The SBA and PROactive

proactive

prō-ˈak-tiv

acting in anticipation of future problems, needs, or changes taking action by causing change and not only reacting to change when it happens from Latin pro "on behalf of, in place of, before, plus Latin activus, from actus "a doing"

 

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TIP OF THE WEEK

 

SBA has propounded a new 7(a) Working Capital Pilot (WCP) Program.   The three-year WC Pilot will take effect on August 1, 2024.

 

The WCP promulgates lenders to make both asset-based and transaction-based WCP 7(a) lines of credit (LOCs) in amounts up to $5 million, with the lines available to support both domestic and international transactions.

The maximum LOC term will be 60 months (5 years), and SBA’s standard maximum guaranties of 85% for loans of $150,000 and 75% for loans of $150,000 and over will apply.

 

Proficuously SSBCI guarantees can also be utilized for revolving lines of credit with a higher percent of guarantee and greater loan amounts.

 

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Indices:

PRIME RATE= 8.50%

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SBA 504 Loan Debenture Rate for July

 

For 20 year debentures, the debenture rate is only 4.89% but note rate is 4.96% and the effective yield is 6.277%.

For 25 year debentures, the debenture rate is only 4.89% but note rate is 4.94% and the effective yield is 6.206%.

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AHEAD OF THE YIELD CURVE

 

Will the Federal Reserve be proactive and start lowering interest rates anytime soon?

 

At its last meeting on monetary policy, its assessment of inflation has been upgraded to “modest further progress" from “a lack of further progress" in the prior version.

 

Modest further progress was reflected last week when the Consumer Price Index for June was down 0.1 percent month-over-month after no change in May. This is the first time the CPI has seen a monthly decline since down 0.1 percent in May 2020.

 

For inflation, the Federal Reserve looks closely at both industrial production and capacity utilization for prospicient prognostications.

 

Keeps your eyes and ears open for this week’s release on industrial production and capacity utilization.

 

The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle.

 

The capacity utilization rate provides an estimate of how much factory capacity is in use.

 

The Federal Reserve watches this report closely to see if production constraints are threatening to cause inflationary pressures.

 

Normally the Fed does not feel there are inflationary pressures until the capacity utilization rate is about 82%.

 

Here is what capacity utilization has been doing and this week interesting little table of data:

 

2007- 81.5

2008- 79.9

2009- 66.9

2010- 74.8

2011- 76.7

2012- 79.0

2013- 77.8

2014- 78.8

2015- 76.5

2016- 75.4

2017- 76.2

2018- 78.5

2019- 79.7

2020- 74.5

2021- 76.4

2022- 80.0

2023- 78.5

 

What does all this mean?

 

I don’t know.

 

Last month, total capacity utilization jumped 0.5 percentage points as it moved up to 78.7 percent in May.

 

Durable goods orders have posted strong gains so far this year and are beginning to be reflected in manufacturing volumes which have surged.

 

Fed policymakers will pay close attention to readings for the most persistent sources of upward price pressures. Some of these remain elevated.

 

The report might be enough to get the FOMC to be more inclined to lower interest rates soon, but not enough to prompt them to act at the July 30-31 meeting.

 

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OFF BASE

 

Proactivity was discussed by George F Will in his classic book, Men at Work.

 

One of his comments was something to the effect that “any difficult thing, like marriage or politics, requires compromise and adjustment.”